Solving a 2014 Obamacare problem pushes premium hikes in 2015

The Obama administration’s effort to end one political crisis during the 2014 Obamacare rollout may have sown the seeds of another controversy: potential double-digit rate hikes in 2015.

If insurers have their way, some residents in politically key states like Florida, North Carolina and Iowa would face hikes of 11 percent to nearly 18 percent — far beyond the average 7.5 percent increase in proposed rates for much of the country.

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Major carriers there in part blame such increases on the administration’s response to the furor that erupted when millions of Americans received notice last fall that their health policies would be canceled because they fell short of Obamacare requirements.

Facing a barrage of criticism from Republicans and some Democrats, who accused him of breaking his promise that people could keep plans they liked, President Barack Obama relented. He told insurers they could continue offering those plans if states agreed. About two-thirds of the states took him up on the offer.

But the president’s decision is now having an impact on upcoming rates, insurers say. Many younger, healthier Americans — the category companies had counted on enrolling when they set their initial prices — stuck with their existing coverage. In states with the biggest numbers of these “transitional” policyholders, their absence from the Obamacare market is pushing premiums higher.

“It really is a state-by-state story,” said Joel Ario, a former director of exchanges at the Department of Health and Human Services who is now managing director at Manatt Health Solutions. “The more transitional policies that are not part of the risk pool yet, the more upward pressure there is on premiums.”

Barbara Morales Burke, vice president of health policy at Blue Cross and Blue Shield of North Carolina, the dominant insurer in that state, said a “very large share” of the company’s 234,000 customers who had the option to keep their plans did so. That was particularly true of younger adults.

She declined to disclose the company’s rate request but said the president’s policy reversal would “definitely” drive up rates for its 2015 Obamacare plans. “It’s a one-time adjustment for what we didn’t assume and couldn’t have assumed last year before we knew transitional plans were going to be a possibility,” Burke said.

According to data compiled by the PwC Health Research Institute, the median proposed increase in North Carolina is about 11 percent, about the same as in Florida and Iowa.

The upcoming premiums are indeed the Affordable Care Act’s next big test. The administration is hoping to build on the successful inaugural enrollment of 8 million people in ACA plans, yet it knows that premium spikes could be a real threat — not just to 2015 sign-ups but to Democrats’ prospects in the fall congressional elections.

The political stakes are significant, said Bob Blendon, an expert on public opinion and health care at the Harvard School of Public Health.

“If there are double-digit increases, they will show up in ads, and people will take it as another sign that the law is going badly,” he said. “If it’s below, well, people know things increase.”

In many states, the early picture is encouraging to the law’s supporters. At least 27 states and the District of Columbia have made insurers’ rate requests public. The average increase is 7.5 percent, calculates PwC.

That’s below the double-digit threshold that is easily turned into a campaign attack and in line with typical pre-Obamacare increases. The law mandates a review of rate increases over 10 percent, a process that knocked down some of this year’s premiums. Regulators in most states are already working on their reviews, but final rates generally won’t be known for another month or more.

“Proposed rate increases have generally been lower than before the Marketplace opened for business, and coming off strong enrollment in the first year, more insurers have decided to enter more markets, driving competition,” HHS spokeswoman Tasha Bradley said in a statement Tuesday. “This competition is translating into a better deal and more choices for consumers.”

The big-picture message may be little comfort in certain states, though.

In Florida, the largest insurer saw most of its 300,000 customers with pre-ACA coverage hang onto it. Florida Blue is now raising rates by an average of 17.6 percent for its plans on HealthCare.gov, which signed up about 334,000 people during the first enrollment season, spokesman Paul Kluding said.

The transition policy “contributed to higher insurance rates” for 2015 plans, Kluding wrote in an email, although the company has also had double-digit increases in recent years. Its announced rates won’t be challenged because the Legislature passed a law barring regulators from reviewing premiums.

Pre-Obamacare plans are one of many factors that go into premiums, the most important being the trajectory of health care spending. The transition policy was first going to allow old plans only through 2014. But in March, the administration extended it for two more years, meaning a substantial group of people who could buoy some states’ risk pools won’t be wading in soon.

About half of the states are allowing such plans to continue at least through 2015, down from 35 in 2014, according to America’s Health Insurance Plans. And in some, insurers have proposed only modest increases.

Then there’s Iowa. CoOportunity Health, a nonprofit insurer that was new to the market there this year, is asking for a 14 percent increase for its ACA plans. The request is about double what it would have sought had the tens of thousands of people sticking with their pre-Obamacare plans come into the market, said Cliff Gold, the company’s chief operating officer.

“Generally, the pundits said the impact nationally wouldn’t be that large because there aren’t that many” transitional plans, he said. “But where there are a lot of them, it has a big effect, and it’s brought bad risk onto the exchange.”

The Obama administration adjusted some programs this year to give insurers more financial protection against the extra risk they face because of the change. Federal health officials also say they’ll enhance a reinsurance program — payments made to mitigate losses when medical costs go over a certain amount — but the regulations won’t be finalized before next year’s rates are set.

The transition policy did not accomplish much politically, in Blendon’s view.

“I think they had to say something to protect the integrity of the president’s promises to people,” he said. “He didn’t really have the power to let people keep their plans. The states, the insurers had to do it.”

GOP candidates have never stopped hammering Democrats on the issue of canceled policies, even in the states that ultimately allowed people to keep them. The Colorado Senate race is one example.

“When [Democratic Colorado Sen.] Mark Udall voted for Obamacare, he promised us if we liked our health care plan we could keep it,” Republican candidate Cory Gardner says in an ad released Monday. “Well, you know how that worked out. I got a letter saying that my family’s plan was canceled. 335,000 Coloradans had their plans canceled too. … You might have one of those letters in your mailbox right now.”

Attacking on premiums would be more difficult. Colorado is reporting some of the lowest requested increases in the country: about 3 percent.